IDEAS home Printed from https://ideas.repec.org/a/aea/aejapp/v16y2024i4p484-527.html
   My bibliography  Save this article

The Dynamic Response of Municipal Budgets to Revenue Shocks

Author

Listed:
  • Ines Helm
  • Jan Stuhler

Abstract

We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany's fiscal equalization scheme triggered by census revisions of population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt within five years to revenue gains, while the adjustment to losses is more rapid. Yet the long-run response is symmetric. The tax response is particularly slow, stretching over more than a decade. Well-known empirical anomalies such as the so-called flypaper effect may thus reflect a short-run phenomenon, while long-run fiscal behavior appears more consistent with standard theories of fiscal federalism.

Suggested Citation

  • Ines Helm & Jan Stuhler, 2024. "The Dynamic Response of Municipal Budgets to Revenue Shocks," American Economic Journal: Applied Economics, American Economic Association, vol. 16(4), pages 484-527, October.
    • Handle: RePEc:aea:aejapp:v:16:y:2024:i:4:p:484-527
    DOI: 10.1257/app.20220718
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/app.20220718
    Download Restriction: no
    File URL: https://doi.org/10.3886/E192924V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/app.20220718.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/app.20220718.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/app.20220718?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejapp:v:16:y:2024:i:4:p:484-527. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.